Stocks in biggest pre-election rally

As political rallies move across capital cities, the stock market posted its biggest rally so far this year last week with a net capital gain of N334 billion as investors appeared to show implicit confidence in the smooth conduct of the election and stability of government’s policies.

Quoted equities sustained six days of consecutive rally to reverse the average year-to-date return from negative to positive, with several stocks closing with their highest gains in recent months. Benchmark indices at the Nigerian Stock Exchange (NSE), which doubled as sovereign indices to measure the performance of the Nigerian equities market, indicated average gain of 2.92 per cent last week, equivalent to net capital gain of N334 billion.

Market pundits agreed that the upswing at the stock market was indicative of investors’ confidence in the potential success of the political transition and considerable reduction in political risks, which had led the stock market to a loss of N1.89 trillion in 2018.

Association of Stockbroking Houses of Nigeria (ASHON) President Mr. Patrick Ezeagu said political tension has somehow reduced as investors have seen the race narrowing down to two political parties.

According to him, though there may still be some apprehension, the level of uncertainties has reduced and people are looking beyond the election and taking advantage of the attractive valuations at the stock market.

Ezeagu, also Managing Director of Solid Rock Securities and Investment Plc, said the price rallies were driven by local investments and were indicative of the fact that average Nigerians have made up their made on what to do.

Globalview Capital Limited  Mr. Aruna Kebira said the political rallies and the conduct of electioneering appeared to have assured investors that there would not be any major disruptions due to the general elections.

“We have been talking about political risk since February 2018 and investors are now seeing that there is not going to be any disruption. So far, we have not had any major fracas among the parties except the intrigues that come with each party trying to outmaneuver another,” Kebira said.

He said the recent rally was a pointer to possible performance of the market after the election, predicting that share prices may repeat their January 2018 feat, when the stock market set all-time new highs.

He added that expectations on the release of audited accounts and dividend recommendations of most companies also positively influenced the market.

Sofunix Investment and Communications Chief Executive Officer, Mr. Sola Oni, also said strong corporate earnings and investors’ confidence in long-term outlook of the market contributed to the rally.

“The real investors, who take long-term view of the market, will not hesitate to beef up their portfolios. These investors believe that regardless of the outcome of the election, a government shall be in power and capital market must always exist,” Oni said.

He added that low market valuation across the board also makes the stock market attractive to investors.

The All Share Index (ASI)- the main value-based index that tracks share prices at the Exchange, crossed another threshold to close weekend at 31,529.92 points as against its week’s opening index of 30,636.36 points. Aggregate market value of all quoted equities at the Exchange rose correspondingly from the week’s opening value of N11.424 trillion to close weekend at N11.758 trillion.

With these, the average year-to-date return, which has been negative, returned to positive with a modest gain of 0.32 per cent, equivalent to net capital gain of N37 billion so far this year. The ASI had opened 2019 at 31,430.50 points while equities capitalisation had opened at N11.721 trillion.

The momentum of activities also improved significantly. Total turnover stood at 1.89 billion shares worth N26.88 billion in 19,213 deals last week as against 1.45 billion shares valued at N14.79 billion traded in 19,318 deals two weeks ago.

The financial services sector remained the most active with a turnover of 1.50 billion shares valued at N19.72 billion traded in 12,581 deals; representing 79.10 per cent and 73.37 per cent of the total equity turnover volume and value.

The consumer goods sector followed with 144.43 million shares worth N4.55 billion in 2,484 deals while conglomerates sector placed third with a turnover of 143.32 million shares worth N220.05 million in 998 deals.

Three leading banks, United Bank for Africa Plc; Zenith Bank Plc and FBN Holdings Plc, were the most active stocks. The three banks accounted for 791.32 million shares worth N10.82 billion in 5,046 deals, representing 41.79 per cent and 40.23 per cent of the total equity turnover volume and value.